Don’t Start Financial Planning Unless You Know This One Thing

Why should you do financial planning right now? Um, maybe you shouldn’t.

I’m going to make a bold statement: I kinda dread it when people come to me for financial planning when the reason they are moving forward is because they have to make a huge decision RIGHT NOW. Financial planning is about looking at everything, and if someone really just wants the answer to one immediate question, then that’s not really financial planning, is it? Now, if one of my existing clients came to me with that same scenario, I am there…because I already know their situation.

The more typical scenario is looking for some level of financial planning when a major life event is about to happen, such as:

Starting a new job

Buy a house

Getting married

Having a baby

Major promotion

Paying off debt

Kids start primary school (and you don’t have to pay for daycare anymore, woohoo!)

Kids start college

That’s totally fine. Ultimately though, timing or life events shouldn’t matter for financial planning because here’s how I like to think of financial planning philosophically: essentially, regardless of where you’re at in your life stage, you’re trying to make the best use of every dollar that comes in and goes out of your household. That just means knowing that you’re saving enough, in the right places. And, having context around the moving parts of your situation that might not be apparent at first glance.

So, for a lot of people, financial planning isn’t about making a drastic change, it’s about more clarity and getting on the same page with the other people in your family (or getting on the same page with yourself). It’s about gaining clarity and shifting gears (maybe a little, maybe a lot) so you don’t get too far down the road before realizing you might need to course correct.

What’s the difference between “saving for retirement” versus “right now, I am putting away as much money as possible so that I can quit my day job and go run an online business from a hammock in Bali.”? Now, right there, all of you probably started to modify that picture I just painted…Hammock? Bali? No, I’d open a handmade store on Etsy and stay right here in Seattle – or whatever. The point is, something gets you excited, and that something most likely needs you to arrange your money to support it, right? And how do you know if you’re getting what you need from your money unless you can see your money paving the way for your specific, awesome future vision for yourself?

My hope for people is that financial planning is never urgent, in the sense that you’re under a crunch to make a good decision about something. Instead, I hope for urgency to get what you want from life. I hope for urgency around your awesome, unique vision of the future. And I know the way you get there is more consistent attention, more clarity and discussions, so when the big decisions come up, you know what to do.

How to find your vision

What if I told you that you could make one decision now that would make all your financial decisions for the next 12 months so much simpler? Would you be interested? (Duh. Of course you would!) I call this decision your Chief Initiative, and it is basically a values and goals statement that can guide all your decisions for the next year. Think of it as true North for your finances.

In my financial planning practice, I was meeting with a couple who seemed to be not only on different pages about their finances, but in entirely different books. The husband had very different life goals from his wife’s. He wanted to borrow money to start a business, change houses, change jobs, etc. She, on the other hand, was nervous about so much change and financial instability. So, I asked them both to identify their biggest life value – their Chief Initiative. Interestingly, for both of them, their biggest value was family. Eureka! Common ground.

Knowing their Chief Initiative helped them focus every financial decision on that value. It narrowed the focus for making decisions from a place where everything was possible to a place where it was easy to see whether a decision was in line with their values or not. It was only one word – family – but the effect it had on their ability to come together and make tough decisions was incredibly powerful.

You may already know what your Chief Initiative should be. For many people, it’s a gut feeling that they can’t deny. They already know what their strongest values are: family, charity, stability, prosperity, etc. But for some, there won’t be a single value that comes to mind right away. Maybe you’ll have a bunch that you have trouble choosing between, or maybe you haven’t got any. Either way, these questions can help guide you to choosing one that you want to focus on:

What’s causing you stress in your life? It’s likely that you’re feeling stressed by something because it’s going against a core value

What is most important to you in your life? I’m talking about the thing that you would do or want or believe no matter what. If money were no object and no obstacle, what would you focus on?

How do you want to feel? Danielle LaPorte is on to something when she talks about her Core Desired Feelings idea, and it can be used to describe your values as well. Maybe you want to feel free, responsible, honest, spiritual, or abundant. That feeling can guide your decisions.

Once you’ve chosen your Chief Initiative, you can validate it a bit more by asking yourself, “What does [your value] mean to you?” The most amazing thing about this process is that there is no right or wrong answer. You value what you value – period.

Remember to download your own free copy of the Chief Initiative workbook so you can help uncover your values for yourself – download that here.

Creative Money, LLC is a registered investment adviser in the state of Washington. The adviser may not transact business in states where it is not appropriately registered or exempt from registration. Individualized responses to persons that involve either the effecting of transactions in securities or the rendering of personalized investment advice for compensation will not be made without registration or exemption.